Sole Proprietor or Single Member LLC?

[emmanuil54]

I've been doing some foreclosure business in Texas. I'm finally deciding to switch full time self employed.

My business will be in Texas where I'll be investing most of my assets/funds. Also, I have a foreign investor (Hong Kong) that is interested in me to invest his money. He's not getting a share of the business, but just 50% of what I make off his money. I'll have enough funds that I won't need any loans, so I won't have any debt.

Should I have my business be Sole Proprietor or Single Member LLC? What will be the advantage/disadvantages be?

How much tax % will I'll have to pay for federal tax and Texas state tax? (For Sole Proprietor & LLC)

Is there anything I need to know about investing for my Hong Kong investor? Any other tax I need be aware of? Any laws (local & international) or procedure that I must know about before committing?

I'm fairly new to this. Any information regarding my situation would also be appreciated.

[gowan]

And you really should find you a good EA enrolled agent that is licensed to practice before the IRS and have a face to face meetinig with all of your available information in hand and explain this business opeation and listen to and get help with how you really will need to handle your bookkeeping and recording keeping for this matter and this PARTNER that will be furnishing you with this funds from Hong Kong for you to invest and and then in turn receive 50% of the amount that you will make of his money at that time during the tax year and how you will need to report the payments that you would make to him for this purpose and the transfer of the funds back and forth to each one of your for this purpose and time in your life. GOOD LUCK with this venture since you are fairly new at it and you YES you do really have a lot to be learned about this complicated matter and arrangement that you are starting for your business operation at this time in your life.
www.irs.gov website use the search box for LLC

Limited Liability Company (LLC)

http://www.irs.gov/businesses/small/article/0,,id=98277,00.html

Entities: Sole Proprietor, Partnership, Limited Liability Company/Partnership (LLC/LLP),

http://www.irs.gov/faqs/faq/0,,id=199633,00.html

LLC Filing as a Corporation or Partnership

http://www.irs.gov/businesses/small/selfemployed/article/ 0,,id=205014,00.html

The LLC structure is not recognized by federal law and therefore their filing status is determined by the Entity Classification Rules. Form 8832 is used for this purpose. Pursuant to the entity classification rules, LLCs with multiple owners that do not elect to be taxed as a corporation are taxed as a partnership.
Classification

The Entity Classification rules classify certain LLC business entities as Corporations:
An LLC that is not automatically classified as a corporation can file Form 8832 to elect their business entity classification. A business with at least 2 members can choose to be classified as an association taxable as a corporation or a partnership, and a business entity with a single member can choose to be classified as either an association taxable as a corporation or disregarded as an entity separate from its owner, a “disregarded entity.” The Form 8832 is also filed to change the LLC’s classification.
Filing

If the LLC is a partnership, it should file a Form 1065, U.S. Return of Partnership Income. Each owner should show their pro-rata share of partnership income (reduced by any tax the partnership paid on the income), credits and deductions on Schedule K-1 (1065), Partner’s Share of Income, Deductions, Credits, etc.

If the LLC is a corporation, it should file a Form 1120, U.S. Corporation Income Tax Return
Hope that you find the above enclosed information useful. 06/27/2012

[artzai]

Your "investor" is your partner. As such you'd have to file a form 1065 each year and issue schedule k-1s.

As a partner, you would be required to withhold 35% of whatever he makes from the partnership and you'd have to send it to the IRS every time you paid him anything. This is to ensure that each year he actually files his US taxes and pays them.

[jung-hwa75]

and before you have more information about the formation and operation of an LLC, I would stick with a sole proprietor
when you create an LLC it is an entirely new, separate entity, files its own reports,pays its own taxes etc and the LLC is a state entity, not recognized by IRS as such, only a Corporation, Partnership,S Corp or sole proprietor

[patwin87]

Never open a corporation unless you have to. I recommend you call and talk to someone at the Small Business Administration. That is what they are there for. Your county will have all kinds of rules.